Millennium Post

SBI chief asks PSBs to improve governance

State Bank chairperson Arundhati Bhattacharya today blamed the governance at public sector banks for poor investor appetite for them and their resultant inability to raise cheaper funds from markets.

"State-run banks cannot have a default fall-back on the government for capital...if you are looking to raise capital...the one thing that investors always talk about is the board governance," Bhattacharya told reporters on the sidelines of a CII event.

Noting that the government has been providing capital to public sector banks whenever they required, she said, "I think it's time PSBs get out of this. But now government is very clear that it will give money only if the banks are actually efficient in all they do."

Out of the Rs 25,000 crore that the government has earmarked for recapitalising its banks this financial year, SBI alone has got over Rs 7,000 crore so far. Last year also it had received a similar amount. Ruing the fact that many banks and organisations consider compliance of corporate governance regulations as a secondary activity, she said, "I must say it is very short-sighted way.

In fact the activities that you consider as your priority are not your priority, regulations and compliance are your priority because when you fall short of regulations and compliance, your main activity will also be sorely impacted."

Talking about the boards, she said, "The role of the board and management and how they intersect is very important for organisations to future-proof themselves from regulatory and market changes."

'Farm loan waivers upset credit discipline'

Expressing reservations over farm loan waiver schemes, State Bank of India Chairman Arundhati Bhattacharya today said such sops may disrupt credit discipline among borrowers. Ahead of the recently concluded assembly elections in Uttar Pradesh, the BJP had promised to bring in a loan waiver scheme for farmers in the state, if its voted to power.

"We feel that in case of a (farm) loan waiver there is always a fall in credit discipline because the people who get the waiver have expectations of future waivers as well. As such future loans given often remain unpaid," Bhattacharya today said on the sidelines of an event organised by Confederation of Indian Industry here. "Today the loans will come back as the government will pay for it but when we disburse loans again then the farmers will wait for the next election expecting another waiver."

She said the bank has not received any proposal to waive off farm loans in Uttar Pradesh.

Bhattacharya said though it is important to support farmers but it has to be done in a way which does not disrupt credit discipline among them.

"When we are trying to ensure that the farmers do well it is important for us to make credit available to them so that they can leverage and do better and for that it is important to have credit discipline," Bhattacharya said.
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